HE system in strife: the answer is to innovate

Campus Morning Mail
9 March 2021

Falling demand is putting the higher education system under incredible pressure. Under present operating patterns, it is most unlikely that the collapse in international demand will be offset by stimulating domestic demand. Some look forward to a surge in numbers of school leavers in the early 2020s, but there is no certainty that they will turn up for a university education.

This is the price being paid for relying too heavily on growth in a single revenue stream and government failure to support the domestic system.  Australia, along with the UK, has relied on international students more than any other country in the world. In the process, it has ignored the financial health of the domestic system.

There is an ongoing pressure around changing student and employer preferences, the emergence of “digital native” students, employer demands for work-effective graduates, the characteristics of ‘education products’ around price, delivery, work/learning integration, and the demand from a significant body of students for more remote/blended learning with some customised face to face mentoring.

The system should respond to these pressures through rationalisation, restructure, disruption, and looking to enter entirely new business areas. We should look forward to a system that can deliver for Australian students, businesses, and the broader community.

• Rationalisation

The forces for rationalisation are occurring in several areas.

Students are becoming aware that there has been an oversupply of “qualified” professionals in some areas. They also have become aware of their mounting debt burden in deferred loan liabilities. There is also a concern with teaching quality.

Many professions do not require a professional university qualification to start work but require far-reaching technical training. In particular, in new digital technology areas, employers value technical qualifications more highly than academic credentials. Technical (and management) knowledge is required to establish and grow a new business.

There will be demand for new skills and knowledge with the resurgence of manufacturing, particularly the “new manufacturing”, which has a very high technology and digital technology orientation. Students will look to learn with non-university higher education and VET providers.

Demand for on-line learning and multi-modal delivery is likely to increase as students become aware of the growing range of choice. Access to connecting technologies and low completion and high attrition rates remains a barrier, particularly for low socioeconomic status students.

Providers will respond to the pressures in different ways. The more strategically oriented will comprehend the demand pressures and react by adjusting their business models. They are the ones who excel in planning, communication and problem-solving and primed to respond to pressures by improving the way they work. Even before the crisis, uncertain funding, competition and globalisation had created “a compelling argument” for providers to become more adaptive, agile, and responsive to change.

Strategically oriented providers also know that they are in the experience business. They will discover and respond to the learning capabilities and qualities valued by students, employers, and entrepreneurs across existing and new industries. Marketing on a hedonistic image of a student experience will give way to promoting the experience of establishing an entrepreneurial business. More and more graduates will leave university to set up their own businesses – or even before they graduate.

Providers will be more concerned about the on-line experience of their students and build active engagement with them. In addition to addressing learning engagement, they will also address students’ mental health issues. Tracking software is being developed to identify these risks.

Some providers, particularly the smaller ones, will develop local and global niche positions. Many small universities around the world are globally recognised for the quality and standing of their teaching and research. Regional universities can become known globally for their expertise and track record in particular aspects of plant or animal science, for example.

The tactically oriented providers can be expected to take a “slash and burn” approach and look for more government subsidy. There is a regular stream of media reports about staff cuts and redundancies. Of course, as with other large corporations, the crisis is also an opportunity to do what had been on the drawing board for quite some time.

Tactical approaches include providing lower-value offerings (cheaper products), such as certificates in competition with the VET sector. This is the equivalent of ‘going downmarket” and could do irreparable damage to the integrity of the core university teaching mission. High delivery costs could mean that the initiatives turn out to be financially unsustainable.

A future diversified system, distinct from the present unified one-size-fits-all system, would encourage providers to evaluate their offerings, look at the opportunities, and play to their strengths.

• New structures

The structure of the unified national system, established under the Dawkins Reforms of 1988, has been remarkably stable, notwithstanding the population increasing by 55 per cent from 16.5m 1988 to 25.5m in 2020[1].

The system is currently constituted by 44 university providers and just over 90 non-university providers that can receive Commonwealth student support. Most of the non-university providers are below 5,000 students. However, they cover a wide range of religious, health, music, visual and performing arts, and management capabilities. Many are linked to universities and TAFE institutes.

The non-university providers have been largely invisible in Commonwealth higher education policy. Rather than think about restructure, it would be nice to focus on how these non-university providers can grow and develop to build the much sought after diversity in the Australian higher education system.

• Disruption

Talent is a critical differentiator in a ‘hyper-competitive’ national and global business environment, and recruiting and retaining talented employees at all levels has become a significant challenge for industry as well as governments.

The rapid rate of technological change in automation and artificial intelligence has meant that the information that employees and contractors need to know is also changing swiftly. Companies cannot wait for the current higher education system to supply workers they hope will help shape their future. The need is too acute and too urgent.

Industry considers that building curricula through internal accreditation (traditional academic boards and faculty) and external accrediting regulatory processes is too cumbersome and excessively slow. With that constraint, and as the digital revolution advances, businesses are taking the initiative in developing their own solutions.

Amazon, for example, announced in July 2019 that it would spend $US700m over six years on postsecondary job training for 100 000 of its workers. MIT Magazine reported that moves such as this might ‘herald a total transformation in the landscape of learning from postsecondary education through to retirement.’ [2]

There has been a rapid growth in online learning platforms, with many formed around collaborations among universities looking to the future. Platforms that have Australian university partners include Coursera[3], edX[4], and FutureLearn[5]. Businesses encourage their employees to participate in these new delivery models to re-skill the workforce across multiple areas, often in specialised or cutting-edge fields.

• Extending into new business areas

Innovative university boards (councils, senates) and executives have been looking beyond student numbers and research income to generate commercial returns – that is, “selling their services for a profit”, as former Harvard President Dereck Bok documented many years ago in Universities in the Marketplace.[6]

The scope of university commercial services extends beyond research commercialisation, contract teaching, and commissioned research and consultancy through to investments in start-ups and related entities, merchandising, naming rights, endorsements, and property development.

Many universities have been very active in large scale precinct and innovation district initiatives. The most recently announced is the $695m Edith Cowan CBD Campus. Similar initiatives are underway in Newcastle, Ultimo, and Westmead, all in NSW.

• Conclusion

The Australian higher education system must deliver superior value for Australian students, businesses, government, and the broader community.

Providers must respond to the changes occurring in student preferences, including preferences for multi-modal delivery and the shift in employer demand towards technically qualified graduates. As such, providers must get better at collaborating with TAFE to deliver the sought after combination of academic and occupational learning.

Providers must also focus on delivering an excellent student experience, including the experience of establishing entrepreneurial businesses. And they must also support the online experience with engagement and looking for risks associated with student mental health.

The demand for non-academic learning in the non-university higher education segment in art and creative practice, drama, music, health, religion, and management should be encouraged with greater policy attention.

In particular, the Australian higher education system must focus on business needs for talent. It must work out ways to quickly adjust, build, and accredit curricula in response to changes in industry practice and the emergence of the new industries of the future. It must also keep abreast of technology business initiatives to create their own internal education systems and participate in those developments.

As with other countries, the system must also work out ways to develop new revenue streams, above and beyond research commercialisation, by using its education, research and property assets in new ways to create wealth. In other words, innovate.

[1] Only three public universities have been added since that time – USC (1994), ACU (1991), and CDU (1989).

[2] Horn, M. B. (2020). “Education disrupted.” Management reporting https://management-reporting.blogspot.com/2020/01/education-disrupted.html#ref5 and Horn, M. B. (2020) “Education Disrupted.” MIT Magazine Spring 2020.

[3] Australian Partners include Macquarie, Melbourne, Sydney, UWA, UNSW, and Atlassian

[4] Australian Partners include ANU, UQ, Adelaide, Curtin,

[5] Australian Partners include Griffith, Melbourne, Monash, Murdoch, Newcastle, QUT, RMIT, UNSW, Wollongong. FutureLearn is a private company jointly owned by the Open university and SEEK group. It partners with universities and cultural and education organisations including the British council, the British library, the British museum, and the National film and television school.

[6] Bok, D. (2003). Universities in the Marketplace: The Commercialization of Higher Education. Princeton, Princeton University Press.

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This paper picks up parts of Chapter 8 in Dr John H Howard’s Rethinking Australian higher education, published by Howard Partners and UTS on 18 February 2021.  John is a Visiting Professor at the University of Technology Sydney and Managing Director of Howard Partners, a public policy and innovation advisory firm.